February 20, 2008

Weitzman: ‘Recent collapse of auction rate securities market a very serious matter for Nassau County.'

NIFA and County need to work together to resolve the approximately $715 million in auction rate debt

Nassau County Comptroller Howard Weitzman today called the recent collapse of the auction rate securities market and its impact on the approximately $715 million in Nassau Interim Finance Authority (NIFA) auction rate debt "a very serious matter for Nassau County."

Many municipalities, colleges, hospitals and other public institutions often use the auction rate securities market as a debt instrument because it provides low cost short term rates on long term loans. However, as of late, the auction rate bond market has been experiencing the crunch caused by risky home mortgages and the recession.    

 "The fact that sky rocketing interest rates in the auction market are affecting other public institutions throughout the country is of little solace to our hard-pressed taxpayers," Weitzman said.  "In a worst-case scenario, it could cost taxpayers up to $5 million more a month in interest until the NIFA auction rate debt is exchanged for long term debt."

Weitzman met with NIFA and County officials last week at his own request to discuss the auction rate securities crisis.

"I am very concerned that NIFA has provided no information on the auction rate securities and the County's exposure on its own volition," said Weitzman. "Since NIFA's debt is paid by the taxpayers represented by County officials, NIFA and the County need to work together to replace the approximately $715 million in auction rate debt.  That can best be done when NIFA and the County share information and work together."